NEW YORK (The Deal) -- Standard Pacific (SPF) and Ryland Group (RYL) on Monday announced plans to combine the two southern California-based homebuilders into a $5.2 billion behemoth that would rank as the fourth-largest homebuilder in the United States.
Terms of the deal call for Irvine-based Standard Pacific to execute a 1-for-5 reverse stock split and then issue 1.0191 shares for each share of Ryland. Based on Friday closing prices the exchange rate offers little to no premium for holders of Westlake Village-based Ryland.
After the deal Standard Pacific holders would own about 59% of the combination, which will be run by Ryland CEO Larry Nicholson with Standard Pacific CEO Scott Stowell acting as chairman of the board. Current Ryland chief operating officer Peter Skelly and current Standard Pacific CFO Jeff McCall will continue in those roles for the combined company.
The merged board will include five current directors from each company.
The companies said the combination would have an enterprise value of about $8.2 billion and own or control about 74,000 home sites. The two builders together offer neighborhoods from entry level to luxury across 41 markets in 17 states, creating a company that should have the scale and diversity to survive a downturn in any particular geography.
The combination, which would have had pro forma sales of $5.1 billion in the 12 months ending March 31, would build in 20 of the top 25 U.S. metropolitan statistical areas and enjoy a top five market share in 15 of those MSAs.
"Combining two industry leaders with nearly 100 years of homebuilding experience between them puts us in a strong position to benefit from the continued housing market recovery," Standard Pacific's Stowell said. "With this merger we gain both geographic and product diversification, expanding our reach and enhancing our growth prospects in the entry level, move-up and luxury market segments. "
The companies estimated they will be able to extract upwards of $70 million in annualized costs. Ryland and Standard Pacific said they intend to operate after closing as a single brand, with a new name to be announced prior to the closing.
The deal is subject to approval by shareholders of both companies. MP CA Homes LLC, an affiliate of Matlin Patterson Global Advisers that ranks as Standard Pacific's largest holder, has agreed to vote its shares in favor of the transaction.